MOM-06 · Momentum

Residual Momentum

Based on Blitz et al. (2011). Calculates momentum from residual returns after regressing out market factor (SPY). Captures 'pure' idiosyncratic momentum rather than beta-driven returns.

MomentumStatistical

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At a glance

Best onAssets with distinct factor exposures

Signal frequencyDaily

Typical holding periodWeeks

Asset classesCommodity, FX

Markets tested10

Data through2026-11-10

What the backtest shows

Beat buy-and-hold on 5 of 10 markets by annual return over 5 years.
Had a smaller maximum drawdown than buy-and-hold on 10 of 10 markets.
Best market by Sharpe ratio: USO (Sharpe 0.92, CAGR 24.0%).
Weakest market: UNG (Sharpe -0.05, CAGR -10.3%).

Equity curve

Residual Momentum Buy & hold · GLD, 2010-01-04 → 2026-11-10, growth of 1

Score and risk profile

Arena Score: 51.3GLD, 5 years

Return quality · 30%42

Drawdown control · 25%28

Consistency · 20%62

Robustness · 15%69

Significance · 10%89

Each bar is a percentile against every strategy on the same market and window (100 = best).

Time in market55%

Ulcer index8.7%

Longest drawdown690 days

Daily VaR (95%)-1.31%

Probability Sharpe > 089%

Beta vs buy & hold0.55

Alpha (annual)-1.3%

Positive months53%

CAGR after 10 bp costs5.2%

Deflated Sharpe (luck-adjusted)32%

CAGR, 90% bootstrap range-1.4% to 17.1%

Max drawdown, 90% bootstrap range-36.4% to -13.0%

How it held up in sell-offs (GLD)

Period	Strategy	Buy & hold
Q4 2018 sell-off	+2.5%	+6.6%
COVID crash (Feb–Mar 2020)	-3.6%	-3.6%
2022 bear market	-5.1%	-7.3%
Market above its 200-day average (annualized) · 58%	+2.2%	+9.0%
Market below its 200-day average (annualized) · 42%	+3.8%	+5.4%

Sell-off dates follow the US stock market. Above/below the 200-day average uses the previous day's position, so there is no look-ahead.

Out-of-sample check (GLD)

Check	Value
Chosen parameters on their 3-year training windows (average Sharpe)	0.63
Same parameters in the following 6 months, when traded (Sharpe)	0.35
Default parameters over the same months (Sharpe)	0.45
Parameter re-selections / changes	28 / 12
Parameter settings with a positive Sharpe (full history)	9 of 9
Sharpe across settings: worst / median / best	0.18 / 0.31 / 0.45

Out-of-sample periods start on 2013-01-04. Training-window figures are flattered by picking the best of 9 settings; the out-of-sample figure is what the strategy actually earned. A large drop, or a result that depends on one setting, points to overfitting. How walk-forward testing works.

Results by market (5 years)

Market	CAGR	Buy & hold CAGR	Sharpe	Max drawdown	Buy & hold max DD	Volatility	Arena Score
USOUnited States Oil Fund	24.0%	20.2%	0.92	-27.5%	-36.2%	26.6%	86
DBAInvesco DB Agriculture	5.3%	8.8%	0.61	-15.3%	-15.9%	9.2%	63
SPYSPDR S&P 500	5.3%	11.6%	0.57	-12.7%	-24.5%	10.0%	59
GLDSPDR Gold Shares	7.3%	16.4%	0.57	-26.9%	-28.3%	14.2%	51
SLViShares Silver Trust	8.2%	15.2%	0.42	-49.9%	-57.8%	30.8%	44
DBCInvesco DB Commodity Index	4.1%	10.8%	0.34	-19.3%	-27.3%	14.2%	55
BTC-USDBitcoin	8.3%	2.6%	0.32	-41.7%	-75.9%	28.4%	62
ETH-USDEthereum	-11.5%	-15.1%	-0.04	-58.1%	-79.0%	36.9%	30
EURUSD=XEUR/USD	-0.4%	-0.7%	-0.05	-12.3%	-17.2%	5.2%	52
UNGUnited States Natural Gas	-10.3%	-30.7%	-0.05	-72.5%	-93.3%	42.1%	51

Strategy metrics use daily returns without trading costs. Buy-and-hold figures are for the same market and window. Rows are sorted by Sharpe ratio.

GLD across time windows

Window	Total return	CAGR	Sharpe	Sortino	Max DD	Win days	Trades
1 year	+3.0%	3.0%	0.38	0.27	-26.9%	24%	11
3 years	+45.5%	13.3%	0.83	0.72	-26.9%	33%	60
5 years	+42.0%	7.3%	0.57	0.50	-26.9%	30%	102
Full history	+62.0%	2.9%	0.31	0.26	-31.9%	24%	308

Rules

Entry

Buy when residual momentum > 0 (positive alpha)

Exit

Exit when residual momentum <= 0

Indicators

Rolling beta to SPY
Residual return = Actual - Beta * Market
Cumulative residual momentum

Inputs

Beta_Window = 252
Momentum_Lookback = 252
Skip_Period = 21

Position sizing

Fixed 100% allocation

Risk controls

Skip most recent month to avoid reversal

Strategy evidence

Only available, validated bundles appear below. Missing evidence is not a passing validation result.

Evidence coverage

10 / 10 declared strategy–market pairs validated

Notes

Based on Blitz, Huij & Martens (2011) research
Removes systematic risk, captures idiosyncratic momentum
Uses simplified CAPM residual (SPY as market proxy)

Related strategies

COMBO-02 · SPY 5Y Sharpe 0.51MACD + RSI Filter CS-01 · CS-UNIV 5Y Sharpe 0.76Cross-Sectional Momentum HMA-01 · SPY 5Y Sharpe 0.06HMA Crossover MOM-01 · EURUSD=X 5Y Sharpe 0.19Time-Series Momentum MOM-02 · DUAL-MOM 5Y Sharpe 0.47Dual Momentum MOM-03 · SPY 5Y Sharpe 0.6152-Week High Momentum

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Backtests are historical simulations on daily data and do not include commissions or slippage. They do not guarantee future results and are not investment advice. See the methodology for how every strategy is tested.